The Academic Company Mixes and Bottles a High-Energy Beverage in Various

question 22

Essay

The Academic Company mixes and bottles a high-energy beverage in various container types and sizes for college students.The aggregate forecast for the next four quarters (1 year) in thousands of gallons is as follows:
Academic's management makes the following assumptions:
• Each employee works 550 standard hours of regular time each quarter.
• On average, it takes 27 hours to produce and package 1 unit (1,000 gallons).
• Regular-time labor costs $6.00/hour; overtime labor costs $9.00/hour.
• Inventory holding cost is approximately $4.50/unit (1,000 gallons) per quarter based upon the ending inventory per quarter.
• Because of extremely hot weather, there is no beginning inventory available to start Quarter 1.
• Management wants a constant work force (no hiring or firing).
• Managers have also decided to always round up the number of employees needed to the next whole integer, i.e., 37.2 yields 38 employees.
a. Determine how many employees would be needed to meet the peak required in Quarter 3.
b. Determine the annual inventory holding cost if Academic decides to use a level production rate of 650 units per quarter.
c. Using a level schedule of 650 units per quarter, what will be the annual employee costs?
d. Using a level schedule of 650 units per quarter, what will be the annual employee costs if only 30 employees are available and overtime is used?
e. If management decides on a chase demand strategy, with production last quarter of 600 units and a rate change cost of $3.00/1000 gallons, determine the total rate change cost.

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Definitions:

Skill- and Knowledge-Based Pay Systems

Skill- and Knowledge-Based Pay Systems compensate employees based on their abilities, expertise, and the complexity of the tasks they perform rather than solely on their job title or position.

Increasing Capacity

The process of enhancing the ability of a company or an organization to produce more outputs.

Perform Well

Achieving or exceeding the set standards of job responsibilities through effective and efficient actions.

Future

Concerns or predictions about upcoming events, trends, or conditions, particularly in society, technology, economy, and environment.